1.
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We note the disclosure that you estimate that the Grieve project has the potential for recovery of approximately 12 MMBbls of gross oil, or 6.1 MMBbls net to your revenue interest. Explain to us what “potential for recovery” represents. Additionally, to the extent that this represents an estimate of oil or gas resources other than reserves, explain why you believe disclosure of these quantities is appropriate. See Instruction to Item 1202 of Regulation S-K.
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2.
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Tell us the portion of proved undeveloped reserves at December 31, 2011 which are not currently scheduled to be drilled within five years of initial booking. For any such quantities, describe the specific circumstances that justify reporting the quantities as proved undeveloped reserves.
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We have established and continue to follow the previously adopted development plan for each of these projects. CO2 EOR projects are designed based on a variety of factors such as CO2 supply development, available CO2 volumes, maximizing rate of return, optimization of the CO2 recycle facility, capacity of the recycle facility, and other factors. Once the development plan is established, it is difficult to alter the development of the field. Because of these criteria, smaller fields tend to have shorter development periods and larger fields have longer development periods. Large fields may have development periods in excess of ten years. CO2 EOR projects where we have PUDs scheduled for development more than five years from initial booking were initiated between 2003 and 2008. The Company has followed, and continues to follow, the development plans in each field with only minor adjustments since the initiation of each project.
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We have significant ongoing development activities in each of these CO2 EOR projects. In each of these CO2 EOR projects, ongoing development activities include development drilling and reentering wells, including the conversion of certain wells to CO2 injection wells, installation of production flow lines, expansion of the facilities primarily for increasing the CO2 recycling capacities, and other necessary development work. The Company has currently budgeted in excess of 61% of its 2012 capital expenditures (before acquisitions) for CO2-related activities, CO2 EOR production represented 47% of total production during 2011, and CO2 EOR reserves accounted for approximately 32% of Company proved reserves at December 31, 2011. CO2 EOR is the Company’s core business strategy.
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We have a historical record of completing the development of comparable long-term projects. The Company has been developing CO2 EOR projects since 1999. The Company currently owns and operates 16 active CO2 EOR projects. None of the CO2 EOR PUDs recognized since 1999 associated with these long-term projects have experienced a downward revision because of the failure to develop the PUDs. Over the past three years, the quantity of PUDs the Company has converted to proved developed reserves is seven times the quantity of PUDs at year-end 2011 which are not currently scheduled to be drilled within five years of initial booking.
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3.
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Provide us, as supplemental information, a schedule that shows, for the years included in your filing, the following regarding your proved undeveloped (PUD) reserves:
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PUD reserves at the beginning of the year;
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PUD reserves added during the year;
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PUD reserves converted to PD reserves during the year;
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Other changes in PUD reserves;
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PUD reserves at the end of the year;
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Total estimated future development costs at the beginning of the year; and,
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Actual development costs incurred during the year.
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2011
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Oil
(MBbls)
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Natural Gas
(MMcf)
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Total
(MBOE)
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|||||||||
PUD reserves at the beginning of the year
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119,199 | 247,377 | 160,428 | |||||||||
PUD reserves added during the year
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34,847 | 42,550 | 41,939 | |||||||||
PUD reserves acquired during the year
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4 | 237,191 | 39,536 | |||||||||
PUD reserves sold during the year
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— | — | — | |||||||||
PUD reserves converted during the year
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(32,590 | ) | (11,930 | ) | (34,578 | ) | ||||||
Other changes in PUD reserves
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(3,468 | ) | (15,950 | ) | (6,127 | ) | ||||||
PUD reserves at the end of the year
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117,992 | 499,238 | 201,198 | |||||||||
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Total estimated future PUD development costs at the beginning of the year 1
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$ | 1,651 | ||||||||||
PUD development costs incurred during the year
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$ | 516 |
1
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Represents estimated future development costs to be incurred on PUDs as included in our December 31, 2010 reserve report.
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2010
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Oil
(MBbls)
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Natural Gas
(MMcf)
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Total
(MBOE)
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PUD reserves at the beginning of the year
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76,687 | 18,462 | 79,765 | |||||||||
PUD reserves added during the year
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47,724 | 103,137 | 64,914 | |||||||||
PUD reserves acquired during the year
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23,886 | 281,569 | 70,814 | |||||||||
PUD reserves sold during the year
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(8,244 | ) | (153,566 | ) | (33,838 | ) | ||||||
PUD reserves converted during the year
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(19,402 | ) | (3,550 | ) | (19,994 | ) | ||||||
Other changes in PUD reserves
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(1,452 | ) | 1,325 | (1,233 | ) | |||||||
PUD reserves at the end of the year
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119,199 | 247,377 | 160,428 | |||||||||
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Total estimated future PUD development costs at the beginning of the year 2
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$ | 647 | ||||||||||
PUD development costs incurred during the year
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$ | 248 |
2
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Represents estimated future development costs to be incurred on PUDs as included in our December 31, 2009 reserve report.
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2009
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Oil
(MBbls)
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Natural Gas
(MMcf)
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Total
(MBOE)
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PUD reserves at the beginning of the year
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82,380 | 129,841 | 104,020 | |||||||||
PUD reserves added during the year
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9,897 | 4,259 | 10,607 | |||||||||
PUD reserves acquired during the year
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692 | — | 692 | |||||||||
PUD reserves sold during the year
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(7,856 | ) | (115,390 | ) | (27,088 | ) | ||||||
PUD reserves converted during the year
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(4,898 | ) | — | (4,898 | ) | |||||||
Other changes in PUD reserves
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(3,528 | ) | (248 | ) | (3,568 | ) | ||||||
PUD reserves at the end of the year
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76,687 | 18,462 | 79,765 | |||||||||
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Total estimated future PUD development costs at the beginning of the year 3
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$ | 762 | ||||||||||
PUD development costs incurred during the year
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$ | 135 |
3
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Represents estimated future development costs to be incurred on PUDs as included in our December 31, 2008 reserve report.
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4.
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Disclosure elsewhere in your filing indicates that your oil and gas reserves include quantities of natural gas liquids. In view of this, explain to us how you have considered the disclosure requirements of FAS ASC paragraph 932-235-50-4(a). If you have concluded that natural gas liquids are not significant, provide us with an analysis that supports your conclusion.
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The Company is responsible for the adequacy and accuracy of the disclosure in the filing;
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Staff comments or changes to disclosures in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and
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The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
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